Pleasanton Real Estate

Obama pitches refinance plan for homeowners

President Obama on Thursday touted his administration’s efforts to lower mortgage rates in a round-table discussion with Washington, D.C.-area homeowners who have benefited from refinancing into more affordable loans.

NANCY STONE / MCCLATCHY NEWSPAPERS

President Obama meets with Treasury Secretary Timothy Geithner and homeowners on Thursday during a housing-refinance round table at the White House.

WASHINGTON — President Obama on Thursday touted his administration’s efforts to lower mortgage rates in a round-table discussion with Washington, D.C.-area homeowners who have benefited from refinancing into more affordable loans.

Their stories were intended to serve as testimonials for the masses who have not called a mortgage broker, whether they are in danger of foreclosure or simply looking for extra money.

Applications for refis have increased 88 percent since February, according to the Mortgage Bankers Association. And Fannie Mae, a mortgage-financing company, has said its refinancing volume jumped to $77 billion in March, twice the level of the previous month.

“The main message we want to send today is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes,” Obama said.

Obama said new housing programs would be presented soon, following last month’s plan to provide $275 billion to help distressed homeowners, of which $75 billion would subsidize the mortgage industry to help borrowers avoid foreclosure. But he offered no details Thursday.

The refinancing boom has been fueled by lower mortgage rates. The average rate on 30-year fixed notes was 4.87 percent Thursday, slightly higher than the 4.78 percent last week. Still, it was the lowest level since 1971, which the president used to bolster his two-pronged argument for why refinancing is so important.

First, families will have more money to spend, which will boost the economy. If that happens, home values likely will rise, which will begin rehabilitating the beleaguered housing market that contributed significantly to the economic collapse.

Despite the uptick in refis, the administration’s housing program has yet to have a significant impact, and homeowners with jumbo mortgages still struggle to take advantage of lower rates.

Obama’s focus was intended simply to draw attention to a government Web site that tells people if they are eligible to refinance their mortgages.

“We hope that everybody takes advantage of it. The Web site is makinghomeaffordable.gov — is that right?” Obama said, repeating the address five times in five minutes. “So get on the Web site, find out what’s available.”

Will the White House and Treasury Let the Big Banks Repay TARP Money? [Larry Kudlow]

Do Pres. Obama and Treasury man Geithner want to control the banks, just as they have taken over GM? Will the government assert political direction of the financial system in place of market forces, or in place of the rule of law as enforced by bankruptcy judges?

These hot topics have been discussed in a recent Politico story, a Wall Street Journal op-ed by my friend Stuart Varney, and an IBD editorial called “Federal Takeover.” Much of the discussion centers on bank paybacks of TARP money. In particular, banks in Louisiana, New York, Indiana, and California (four in all) have offered to pay back $340 million to Uncle Sam. IBD speculates that the Treasury declined to accept these payments.

Melissa Francis and I discussed this today on CNBC, and almost immediately the Treasury Department called one of my producers and e-mailed a quarterly update of all TARP payments made by the Treasury that include capital-repayment details. It turns out that the Treasury has in fact accepted TARP repayment: The Bank of Marin Bancorp in California paid down $28 million, Old National Bancorp in Evansville, Ind., paid back all $100 million, Signature Bank in New York repaid $120 million, and Iberiabank Corp. in Lafayette, La., paid back $90 million.

So we know the Treasury is accepting payment from these smaller regional banks. However, we do not know if the White House or the Treasury will accept repayment of TARP money by the nation’s biggest banks.

In a speech today, Goldman Sachs CEO Lloyd Blankfein once again indicated his desire to quickly pay back TARP. Jamie Dimon of JPMorgan has indicated a similar desire, as has BofA CEO Ken Lewis. But the Politico story implies that Obama does not want the big banks to pay down TARP, and that he is in effect telling the banks, “You haven’t taken your antibiotic over the full period to heal your illness.”

But most of the big bankers are saying they’re regaining profitability. This is especially the case since they can borrow short at near-zero interest rates and lend long at five or six years.

There is a suspicion that the Treasury will use its new bank stress tests to judge whether the big banks should pay back the government capital purchases. But no one knows whether these stress tests are truly standardized; why they are any different from the normal FDIC tests, or for that matter testing by the banks themselves; whether this is going to be a Treasury judgment call; or whether that Treasury judgment call in effect puts a gun to the collective head of the banks in order to force the banks to sell toxic assets through the Public-Private Investment Program.

Many in the government believe that if some banks pay the funds back and others do not, a scarlet-letter stigma will be attached to those who do not. And they believe that might cause a deposit flight, or even capital flight. But it can’t be healthy for the government to determine whether the banks themselves are healthy. And the public is so opposed to the TARP program, you would think paying back TARP in order to retire our over-the-top debt would be a good thing.

Meanwhile, at yesterday’s National Review Institute luncheon here in New York, Sen. Bob Corker told us that he suspected — merely a suspicion — that one or two big-bank CEOs would be removed by the Treasury within 60 days of the conclusion of the stress tests. This is what Treasury secretary Geithner hinted at on the recent Sunday talk shows. And that raises the question of whether a bank CEO-removal would be playing politics: Would it be to even things out after the removal of Rick Wagoner of GM — to placate the unions and their allies like Sen. Carl Levin of Michigan who are charging that the auto industry is getting much tougher treatment than the bank industry?

How to end the political direction of our banks? Let them get out from under TARP as soon as possible. Let them make their own decisions. Let’s end this sordid chapter of unprecedented government intervention in the market economy.

Leuthold Says Stocks Will Surge, Depression Avoided

By Betty Liu and Lynn Thomasson

March 4 (Bloomberg) —   Steve Leuthold , whose   Grizzly Short Fund  returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy.

“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”

The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Leuthold, who oversees $3.2 billion at Leuthold Weeden Capital Management in Minneapolis. He predicted the   Standard & Poor’s 500 Index  will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33.

The index rose 2.2 percent to 711.96 at 11:46 a.m. in New York on speculation China will add to a 4 trillion yuan ($585 billion) spending plan and U.S. lawmakers will reach agreement on a plan to stem mortgage defaults.

Because a rally is likely, Leuthold said investors shouldn’t buy his Grizzly Short Fund. It has returned 26 percent in 2009. Short seller   Bill Fleckenstein , who warned of the housing bubble in 2005, closed his 13-year-old bear market fund last year because valuations made it “too dangerous” to bet on more losses, he said in a interview last month.

China, Korea, Taiwan

The Leuthold Core Investment Fund, which bets on stock gains, is most concentrated in biotechnology companies, automotive retailers and   education providers , Leuthold said. Investors should also buy equities in China, Koreaand Taiwan because their economies are growing faster and the Asian banking system hasn’t been battered by subprime loans as badly as U.S. financial institutions, Leuthold said.

The Chinese economy may grow 7.7 percent this year, compared with a 2 percent contraction in the U.S., according to the median economist estimates in a Bloomberg survey. North American financial firms have reported $811.2 billion in credit losses and writedowns tied to mortgage defaults, 27 times more than banks in Asia, according to Bloomberg data collected since the housing slump began in 2007.

“We’re going global,” he said. “Global investing is the way of the future.”

To contact the reporters on this story:  Betty Liu  in New York at  bliu17@bloomberg.net;Lynn Thomasson  in New York at  lthomasson@bloomberg.net